BG Group surges back to £2bn profit for 2015 as it looks forward to merger with Shell

Oil and gas exploration firm BG Group is back in the black just weeks before it joins forces with giant Shell and despite continued pressure from tumbling oil prices.

The company posted a pre-tax profit for the full year of $2.97billion (£2billion), turning around a loss of $2.3billion in 2014. It stepped up its financial performance after narrowing pre-tax losses in the fourth quarter 2015 to $1.2billion, compared to a deficit of $8.3billion over the same period the year.

As a result shares were up 12.1p to 1,069.0p at lunch. Analysts said the return to profit was driven by BG slashing its capital expenditure by 32 per cent over the past 12 months.

Joing forces: Shell is due to complete its mammoth takeover of BG in two weeks time after the deal was given the green light by shareholders last week

BG Group's chief executive, Helge Lund, said: 'We are pleased to have delivered an excellent operational performance in 2015 with results in line with, or ahead of, our guidance for the year.

'This strong operational performance is the result of the capability and commitment of our teams across the organisation and we will deliver a high-performing business into the combination with Shell.'

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Lund added that its shareholders would receive Shell's 2015 fourth-quarter dividend and would not receive a further BG Group dividend for 2015.

Michael Hewson, at CMC Markets, said: 'Putting all the numbers to one side the fact that the business has returned to pre-tax profit for the year is welcome given last years rather large loss.'

He added: 'On the face of it BG Group's numbers are better than expected due to the fact it is less reliant on oil revenues than its peers, and in a way reaffirms the case for Shell's takeover for the company, as it looks to diversify away from its core oil business.

'The main concern remains the price tag and in particular how big any savings will be for the deal to start accruing value.'

The group is on the verge of being taken over by Shell in a £34billion mega merger after shareholders at both companies last week gave the green light to the tie-up.

Shell insisted earlier this week that its tie-up with BG Group heralded the start of a 'new chapter' despite seeing annual profits crash by 80 per cent.

Shell's full-year earnings tumbled to $3.8billion in 2015 from $19.0billion in 2014 after it was hammered by the recent collapse in oil prices.

When the takeover was first agreed in April, oil was trading at about $55 a barrel, but it has since fallen sharply and is currently trading at about $35 a barrel, leading some shareholders to oppose the plan.

Shell has priced its BG acquisition based on oil prices rising sharply from their current low levels - predicting a bounce-back of more than 35 per cent this year and further rises ahead.

Helal Miah, at The Share Centre, added: 'Todays' results from BG should be the last one published by the group as by the next quarter it is likely to be merged in with Royal Dutch Shell.

'For investors in the merged company, it should mean a company with a stronger balance sheet which should benefit from the cost synergies, particularly from the LNG businesses where synergies are estimated to be in the region of $2.5billion per annum.

'Furthermore, the merger should provide more geographical diversity and help the company navigate through the lower oil price environment.'